ABSTRACT
This dissertation offers a conceptual framework capturing forecasting related
activities in a formal organizational context, and it empirically assesses how and
how well an organization utilizes forecasting tools and results. Specifically, a
multilevel model is formulated that suggests that forecasting capabilities and
forecasting processes predict forecasting effectiveness. The model is tested through
a field study utilizing a qualitative and quantitative research design. The findings
suggest that there are great differences in how forecasting is done among mangers
within the same organization, and that in the absence of process congruency (i.e.,
similar procedures for similar forecasters), the use of a bottom-up approach to
forecasting contributes to inconsistent forecasting results. Further, the findings
suggest that when it is difficult to establish solid market information, managers
often look to competitors in order to establish pseudo-estimates of supply and
demand.
With respect to content congruency (i.e., the imposition of higher level
forecasts onto lower level entities), the dissertation examines the consequences of
making decisions based on data from different levels of analyses (and with
different geographic scopes).The results highlight the consequences of relying on
higher level forecasts when a mismatch exists between organizational and national
“footprints”. Using various economic variables to predict housing starts across
levels, the analyses found disparate results for the lower level of analysis. The
results also reveal great differences in the strength of the forecasting models
between different levels of analysis and between different entities at the same
level. Different combinations of variables contribute toward predicting the key
dependent variable, housing starts, at different levels, and even between
geographic markets at the same level of analysis.
The findings suggest that traditional organizational forecasting performed at
the national level presents decision makers with a “hit or miss” scenario when
trying to predict housing demand in the local markets. The inability to generate
strong forecasts utilizing the same variables in different markets appears to be
problematic. Thus, a “bottoms-up” approach to the technical generation of
forecasts is desirable Recommendations for both future research and practice are
suggested.
TABLE OF CONTENTS
ABSTRACT ............................................................................................................................................................... ii
ACKNOWLEDGEMENTS ..................................................................................................................................... iii
TABLE OF CONTENTS ..........................................................................................................................................iv
LIST OF FIGURES ................................................................................................................................................ viii
LIST OF TABLES .....................................................................................................................................................ix
CHAPTER 1: THE RESEARCH PROBLEM .......................................................................................................... 1
1.1. Motivation for the Study .......................................................................................................................... 1
1.2. Problem Statement .................................................................................................................................. 2
1.3. Context of the Study ................................................................................................................................ 4
1.4. Data Sources and Methodology ................................................................................................................ 5
1.5. Dissertation Contributions ........................................................................................................................ 5
1.6. Organization of the Dissertation ............................................................................................................... 6
CHAPTER 2: LITERATURE REVIEW .................................................................................................................. 8
2.1. Overview ................................................................................................................................................. 8
2.2. Existing Research .................................................................................................................................... 8
2.3. A Practical Example of Poor Forecasting Practices: The Real Estate Crisis .......................................... 13
2.4. Forecasting Failures: Evidence from Other Industries ........................................................................... 16
2.5. Individual Forecasting Capability, Processes, and Effectiveness ........................................................... 18
2.6. Summary and Conclusions ..................................................................................................................... 19
CHAPTER 3: PROPOSITIONS AND HYPOTHESES SECTION ...................................................................... 21
3.1. Overview ............................................................................................................................................... 21
3.2. Formulating a Multilevel Model of Forecasting Effectiveness .............................................................. 21
3.3. Antecedents of Forecasting Capabilities ................................................................................................ 24
3.3.1. Personal Background ............................................................................................................ 24
3.3.2. Personal Proclivity – Attraction and Enthusiasm for Forecasting ......................................... 25
3.4. Predictors of the Individual Forecasting Process (“How Forecasting is Done”) .................................... 26
3.4.1. System Level Influences upon the Individual Forecasting Processes ................................... 27
3.4.2. Competitor Influences upon the Individual Forecasting Processes ....................................... 28
3.5. Determinants of Individual Forecasting Effectiveness ........................................................................... 30
3.6. System Level Forecasting Effectiveness ................................................................................................ 30
3.7. The Importance of the Technical Forecast Results: Aggregation & “Footprint” Issues ......................... 31
3.8. Summary and Conclusions ..................................................................................................................... 36
CHAPTER 4: RESEARCH DESIGN AND METHODOLOGY ........................................................................... 37
4.1. Overview ............................................................................................................................................... 37
4.2. Research Design .................................................................................................................................... 37
4.3. Sample Organization .............................................................................................................................. 38
4.4. The Pilot Study ...................................................................................................................................... 39
4.5. The Full Study - Data Collection ............................................................................................................ 40
4.6. Measures: Propositions ........................................................................................................................... 41
4.6.1. Questionnaires ....................................................................................................................... 41
4.6.2. Phone Interviews ................................................................................................................... 43
4.7. Measures: Hypotheses ............................................................................................................................ 46
4.7.1. Dependent Variable for Quantitative Hypotheses ................................................................. 47
4.7.2. Independent Variables for Quantitative Hypotheses ............................................................. 48
4.8. Summary and Conclusions ..................................................................................................................... 49
CHAPTER 5: ANALYSES OF DATA AND RESULTS ........................................................................................ 50
5.1. Overview ............................................................................................................................................... 50
5.2. Characteristics of the Respondents ......................................................................................................... 50
5.3. Descriptive Statistics .............................................................................................................................. 50
5.4. Results: Antecedents of Individual Forecasting Capabilities ................................................................. 52
5.5. Results: Description of Individual Forecasting Processes ...................................................................... 53
5.6. Results: Determinants of Individual Forecasting Effectiveness ............................................................. 61
5.7. Results: Determinants of System Level Forecasting Effectiveness ........................................................ 62
5.8. Results: Aggregation and Footprint Issues ............................................................................................. 65
5.8.1. Ordinary Least Squares Regression ...................................................................................... 66
5.8.2. Within and Between Analyses .............................................................................................. 72
5.9. Summary of Findings ............................................................................................................................. 78
5.9.1. Managerial Practices and Forecasting Effectiveness ............................................................ 79
5.9.2. Aggregation and Footprint Issues ......................................................................................... 83
5.10. Summary and Conclusions ................................................................................................................... 84
CHAPTER 6: DISCUSSION ................................................................................................................................... 86
6.1. Overview ............................................................................................................................................... 86
6.2. Review of Research Findings ................................................................................................................. 86
6.2.1. Findings: Managerial Practices and Forecasting Effectiveness ............................................ 86
6.2.2. Findings: Aggregation and Footprint Issues ......................................................................... 88
6.3. Contribution to Literature ....................................................................................................................... 89
6.3.1. Contributions: Managerial Practices and Forecasting Effectiveness ..................................... 89
vii
6.3.2. Contributions: Aggregation and Footprint Issues .................................................................. 91
6.4. Limitations of the Study and Future Research Needs............................................................................. 93
6.5. Practical Implications ............................................................................................................................. 94
6.6. Summary and Conclusions ..................................................................................................................... 98
REFERENCES ....................................................................................................................................................... 100
APPENDICES ......................................................................................................................................................... 105
Appendix 1: Institutional Review Board Approval .............................................................................................. 105
Appendix 2: Cover Letter to Potential Participants ............................................................................................. 107
Appendix 3: Questionnaire for Divisional Presidents .......................................................................................... 108
Appendix 4: Pre-Interview Questionnaires for Area/Vice Presidents ................................................................ 111
Appendix 5: Main Interview Script ....................................................................................................................... 117